The Financial Services Authority (FSA) has decided that Contracts for Difference (CFDs) have to be regulated more thoroughly.

The Financial Services Authority has had Contracts for Difference in it sights for some time.  This is an extension of its crusade to clean up the market in small shares (“small caps”) to small investors.  Many of the people who were selling small caps have started to sell contracts for difference.

This new attention may affect some of the smaller brokers who have recently moved into selling contracts for difference, but they are unlikely to affect the bigger players in the market – and the sort of people who appear in our comparison engine.

You may think that the Financial Services Authority is going to be broken up, so this does not matter.  However this is merely a headline.  What has happened is that the Financial Services Authority is going to be moved into the Bank of England, in 2012.  Hector Sants, the head of the FSA is going to be a deputy governor of the Bank of England.  Although there are real differences in the approach of the two, there is going to be little effect seen with Contracts for Difference apart from a new name on the door.

The FSA has been moving from its “light touch” regulation for some time, and the Bank of England has never been a fan of this approach.  Over time we are likely to see consumer regulations come in for Contracts for Difference (CFDs), although this is going to take some time.  However if there is a single scandal in the next couple of years, expect the timetable to be accelerated.